Major Changes to Student Loan Program

Pre-Med & Medical School
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All Grad PLUS loans have been eliminated.

Federal Student loans now have a $200,000 lifetime cap for professional students. (This includes any money borrowed during undergrad.)

Repayment options have been reduced to 2 plans: IBR and RAP.

IBR =income based repayment.
Income-based repayment caps monthly payments at 15% of your monthly discretionary income, where discretionary income is the difference between adjusted gross income (AGI) and 150% of the federal poverty line that corresponds to your family size and the state in which you reside.

RAP = Repayment Assistance Program, a new plan created in the Big Beautiful Bill.
Under the proposed RAP, borrowers would be able to opt in to a plan where they pay according to their income. If their income is $10,000 or less, they’d pay $120 per year ($10 per month). Borrowers who make between $10,001 and $20,000 would pay 1 percent of their annual income, those making between $20,001 and $30,000 would pay 2 percent, and so on, up to $100,001 or more, at which point the rate becomes 10 percent of annual income.

RAP will include a spouse’s income in payment calculations.

GOOD news: PSLF for doctors and dentists will be allowed—at least for now. However, the Trump administration is working on a major overhaul of PSLF. The result of the overhaul will be announced at later date and does not require congressional approval.

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I can kind of get how the new repayment options make the government more money (which most governments want), but not how limiting the amount of debt that professional (higher earning from my understanding) students can take out.

That part didn’t really make any sense to me. Wouldn’t they want more high income taxpayers with a larger debt to pay directly back to the government?

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These new repayment options won’t make the government more money than a regular repayment plan over 20 years, because the amount you pay is capped.

The more debt you take out, the more likely you are to seek forgiveness or just never repay the balance (because your repayments are capped based on income and might not even cover the interest if the debt is large enough). If/when your debt is written off, that’s a loss for the government.

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Alright. I don’t really know about this topic, so I have to ask. How bad is the interest? Because it isn’t that bad, I think I’m personally just not going to pay back my student loans at all.

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Have you taken out any loans yet?
Here are the interest rates for this year: Federal Student Aid

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and the fees:

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If you are talking about federal student loans, the government can garnish wages of non-payers. Additionally, not paying would negatively impact one’s credit rating, making it difficult to get any other types of loans (mortgage, car, etc.) Of course there’s the whole ethics thing too
of taking loans knowing one has no intention of paying it back.

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As of July 1, the interest rate for unsubsidized federal student loan for professional students are 7.94% annual.

The government can also withhold any tax refunds and your social security payments if you owe on your student loans.

Since large healthcare providers are highly risk adverse, they usually won’t hire you if you’re in default on your student loans.

Medicine as a profession hold ethics in very high regard. Taking out a loan with no intent to repay it–major ethical breach.

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Is that a good rate?

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It’s what’s available.

Private education loans carry interest rates between about 4% and 18%, depending on the lender, your creditworthiness, the length of the loan, whether it’s variable rate or fixed rate and what repayment plan you opt for. (Most private loans do not offer loan deferment and require repayment to begin immediately upon disbursement.)

Private loans are ineligible for PSLF. This means you are required to keeping paying on the loan until it plus all accrued interest is completely paid off.

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It’s better than private, but its still a loan. How much can you get from private loans?

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It depends. On the lender and any caps they have on education loans. What other loans you have already. Your credit score. Whether you have a co-signer who has an income that will support repaying your loans. Various other stuff.

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For an unsecured loan? Yes, a very good rate. That doesn’t mean you should take out loans at that rate. A credit card rate can be 10% to 30% or even higher for those with bad credit scores.

Student loan rates have traditionally been better than a generic unsecured loan because they know you are using it for an education, not for a trip to Europe or a shopping spree. But that’s also why there are strict rules about it.

For the RAP, did it say if the interest was accruing or being forgiven as payments are made? It isn’t a very good deal if you only have to pay $120/yr but the interest is being added back to the principal.

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For RAP, there is an interest subsidy available (assuming Congress approves the funding for it) for very low income borrowers. How much of the interest it covers is unclear.

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How bad are private loans? Saw this news a while back but haven’t been on CC. If I can keep my living expenses around $20-25k, go in state, and save up money, I can afford to just do federal loans and savings, but otherwise there’s no way I can stay under the new loan cap. And that’s a pretty tight budget. I guess my main question is how big of a deal actually is this and how much should I prioritize avoiding private loans? If private loans can have interest rates lower than public and I can get my parents to cosign, what’s bad about them?

Also I’m trying to have an open mind—can someone explain to me why they’d cap loans on a high income profession?? The gov makes money on the interest and I don’t imagine doctors are the ones commonly defaulting on their loans. Just a bit confused on the logic here.

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Private loans likely won’t have as low rates as the federal loans. But we don’t really yet know how the private loan market for med school will shake out based on these policy changes. Some universities may offer loans to med school students at relatively lower rates, for example.

We aren’t in the political sub-threads, so I’m not sure I can answer this. But the root/consequence of this change is to limit access of certain groups to med school.

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We’ve taken out federal student loans and private loans, even with excellent credit the interest rates on the federal are lower. My daughter just graduated with her doctorate in PT, used grad federal loans for that. Fortunately it was “just” 3 years but over $200,000 all in (3 years included full time summers and many unpaid full time clinicals). She paid for rent and food by bartending, although she was only 1 out of 3 in her cohort with a part time job (the program is a lot). I’m guessing fewer are able to work part time in medical school.

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  • Private education loans have higher interest rates than federal student loan. (Currently unsecured loans have interest rates in the 10-35% APR range.)
  • They aren’t eligible for any of loan forgiveness programs. (Like PSLF)
  • They aren’t eligible for the federal loan repayment programs (IDR or ISR) nor any of the federal, state, VA or IHS sponsored repayment plans (work for health clinic in a designated area and get $X amount of your loan forgiven every year)
  • They often require the student to begin immediate repayment of the loan shortly after it’s disbursed.
  • Private loans have their own annual and lifetime caps
  • They may require a credit-worthy co-signer
  • Private loans will impact your credit rating, making it harder to get a car loan or mortgage during or after med school.

Think about it, @elise123, do you really want your parents to tap out the equity in their home or take on a large amount debt as they’re approaching retirement? Will co-signing your loan put their future at risk?

I know you think-- “why I’ll graduate and eventually get a high paying job and will repay my own loans.” Great if you can do that.

However, not everyone who starts med school finishes it. Not everyone who starts residency finishes it. Car accidents, cancer, mental health issues, academic problems, physical/sexual assaults, chronic health problems–these things happen unpredictably and can end a career before it even gets started.

Your parents will be left holding a hundred thousand dollars in debt if something should happen to you. A life insurance policy will cover your debt if you should die, but what happens if you flunk out of med school, fail a board exam , fail to Match for residency or are asked to leave residency because of personality clash with your supervisors?

Don’t say “it won’t happen to me” because you can’t know what the future holds. Cancer can happen to anyone. (Even a healthy, marathon runner like my 24 YO daughter who was diagnosed with breast cancer at the end MS1.)

Mental health issues are very common in med school and residency with an 1 in 4 med students reporting major depressive symptoms and 11% report having “serious” suicidal ideation. Mental health reasons are the #1 reason why med students don’t graduate. Suicide is the #1 cause of death of med students and residents.

That’s nice idea, but med schools just took a 30% hit to their budgets with the cancellation of NIH funding and the reduction of grant overheads

Plus frankly, with the exception of a few “deep pocket” schools, med schools just don’t have the funds to subsidize loans for all their students. Public med schools certainly don’t have the funds to do that. Most private med schools don’t either.

It’s estimated to cost between $120,000-$150,000/year to educate ONE future physician. Tuition alone doesn’t come close to covering that.

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So then the question is, who should bear the risk for Student X’s loans, the student, the family, the private lender, the med school, the taxpayers, or some combination thereof.

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Many med school specifically prohibit outside employment during med school, though there may be some work-study type jobs allowed during the pre-clinical years. Tutoring and paid lab research are pretty common during pre-clinical.

Med students go to school year round without breaks so summer jobs are not a possibility.

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I already thought the medical school path was very skewed to the wealthy (spend hundreds upon hundreds of hours volunteering or working for minimum wage during undergrad/gap year) now it is even more skewed. I was honestly shocked at the pay for necessary clinical experience. Do not be surprised at massive shortages as our system really relies on it’ll be worth it in the end idealists.

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Seventy-five percent of medical students in the United States hail from families in the top 2 income quintiles as defined by the U.S. Census Bureau, while 5% of medical students represent the bottom quintile.

Socio-economic diversity in medical school has decreased over time.